Case Study For SaaS Financial Model – SVOD
Background of SaaS Financial Model – SVOD
This case study for the SaaS financial model is about Subscription Video On Demand (SVOD). SVOD is a popular OTT video monetization model where subscribers pay a flat subscription fee in return for unlimited access to a massive library of video content — ad-free. Think of it as a SaaS subscription, but for video content. Our client’s company in the SVOD industry was doing well but had strong competition in the market. This is why this SVOD company contacted OAK Business Consultant as a professional SaaS financial analyst.
Challenges of SaaS Financial Model – SVOD
Since this SaaS SVOD company is in the growth stage, it was growing well as its subscription increased day by day. Now their plan was to get external investment from an investor to reach out to more people. And for that purpose, they needed a solid business proposal and SaaS financial model that represented the company’s financials and potential future earnings. Hence, they wanted to know the following SaaS financial metrics, the growth rate of the company, its profitability, churn rate of customers, CAC analysis, Sensitivity Analysis, and how much they have to put into the marketing budget and the expected growth rate.
As a professional SaaS financial analyst, Oak Business Consultant identified all their SaaS financial ratios and provided the following services:
- Financial analysis of the Income Statement
- Projections for 3 to 5 years
- Key Metrics of the company
- Sensitivity Analysis
- CAC and CLV analysis
“Oak Business Consultant forecasted their 5 years growth and profit. Our expert financial consultancy teams also examined the company’s Fixed Cost, Expenses, CAC and CLV, and Churn rate and compared it to the industry average, so it gives insight about their performance.”
Solutions of SaaS Financial Model – SVOD
We conducted this SaaS financial analysis based on the following SaaS financial metrics.
3.1 Financial Health Analysis
We provided the SaaS financial statements (income), Break Even Analysis, and SaaS financial metrics for 5 years that would help the company review its financial health.
1.1 Revenue Analysis
Oak Business Consultant carefully analyzed the products/ services sales. And we found out that 90% of this company’s revenue came from its apps and software products. This indicated that they should focus on their top-line services and be more focused on marketing and pricing models.
In the first section of the income statement, we not only forecasted the number of subscribers but also analyzed the churn rate of customers and segment-wise pricing. After analyzing the number of customers, we projected the revenue. The SaaS SVOD company under consideration had multiple subscription tiers. We calculated the income for each model separately based on the number of subscribers.
In the revenue sheet, we analyzed target subscribers for 5 years. We examined data by calculating the number of subscribers with a chum rate, so we got the total customers. Moreover, we forecasted revenue and cost of services by taking three different plans: basic, standard, and premium. Its values are calculated by segments and identified as total revenue (see the figures below).
1.2 Market Budget Forecasting
We also analyzed traffic from different social media platforms to assess the estimated subscribers. By collecting target consumers and conversion rates, we forecasted the marketing budget document that gave insights into their subscribers from different channels. In this sheet, we forecasted the budget by estimating targeted traffic and CPCs (Cost per Click) from different social media platforms that included Facebook, Instagram, Pinterest, Twitter, and Youtube. Moreover, we predicted output by assuming data from different channels.
1.3 Key Metrics
We have analyzed the CLV and CAC ratio to help this SVOD SaaS company grow. We estimated CLV and CAC ratios which brought to the table a deep understanding of their spending and receiving. It is a ratio that decides how much a company is paying versus how much is getting in return. By assuming net subscribers, CAC and ARPA, we got the CLV ratio and gross margin ratio.
Graphs are easier to analyze than numbers because it helps both the investor or entrepreneur to see the projections in real-time. So, we provided the following graphs in their dashboard.
1.5 Project Evaluation
Being an investor, you would want to see the comparison of the equity against the investment. So, we helped them determine the company’s worth based on its future earnings. We provided them with discount cash flow, Net Present Value (NPV), Internal rate of return (IRR), and free cash flow. In addition, we provided an analysis of investment vs equity comparison.
1.6 Sensitivity Analysis
When a business is in the initial stage, it is important to predict the actual market scenario to channelize the marketing efforts. So, we performed sensitivity analysis for our client, having 3 kinds of situations for sales, i.e. low, moderate and optimistic, and analyzed the outcomes for different circumstances. It really helps the clients to gain knowledge of why their company could not achieve their sales target.
1.7 Break-Even Point
We have calculated break-even subscribers along with targeted sales for 5 years they need to achieve to reach and maintain break-even.
Overall, the SaaS SVOD company under consideration has a lot of potential for growth. By focusing on their top-line services, refining their marketing and pricing models, and leveraging data analysis tools to track key SaaS metrics such as CLV and CAC ratios, they can achieve sustainable success in the competitive world of SaaS. Additionally, by performing sensitivity analysis and calculating the break-even point, they can better understand the market landscape and adjust their strategy as needed. Ultimately, with the right combination of talent, tools, and strategies, this company has all the ingredients for success. Oak Business Consultant always stands ready to help our clients achieve their goals.